Hendricks & Partners Capital, LLC, in partnership with multifamily capital providers nationwide, is able to provide its clients with conventional debt that is used for financing stable properties for fixed durations that is issued by entities other than government or quasi-governmental agencies, with either fixed or variable rate alternatives. This product is generally underwritten more conservatively - typically within a 55-75% loan to value range and a 1.2 debt service coverage over 3 year to as long as 20 or 25 year maturities. Fixed rate debt will typically have some barriers to early prepayment and therefore shouldn't be used in transitional or short-term investment scenarios.

Portfolio Debt
Most conventional debt alternatives, with CMBS being the notable exception, are held as an asset by the originating institution, and therefore are also known as portfolio debt. Portfolio lenders can offer more flexibility in their terms and structure to fit individual assets or borrower needs. Portfolio debt tends to be very relationship oriented - good customers may get more advantageous terms than new borrowers with no prior borrowing history. Examples of conventional debt are as follows:


Banks
use for smaller deals, secondary markets, strong borrowers, and repeat business

• 3-5-7 maturities are common; A-B & C assets
• Offer both fixed rate term loans and floating rate loans over an index rate
• Hybrid structures enable borrowers to sell or refinance during variable term
• Personal recourse is standard; non-recourse offered on case-by-case basis
• Smaller loan sizes common $500K - $10M
• Local lender - rarely go beyond geographic market radius of the issuing bank
• 60-75% LTV, 1.2 DSC; sometimes compensating balances are required
• Typically utilize a 25 year amortizations schedule, but may offer partial I/O
• 30 day funding period from completion of application

Life Companies
larger deals, primary markets, strong operators, portfolio financing

• 5 to 25 year loan maturities (loans of 15 years or more are self-amortizing)
• Non-recourse up to 75% LTV with a 1.2 DSC: A-B Assets only
• Many life companies lock rate at application, some will issue a loan commitment subject to conforming appraisal.
• Typically offer fixed-rate loans in sizes from $5m to 100M+
• Designed to stay in place for term: lock-outs, yield maintenance or exit fees are common barriers to payoff - typically pre-payable 90 days before maturity.
• Life companies offer better rates for low-risk loans than banks or CMBS.
• 60 days to funding from date of completed application.

Credit Companies
interim-risk profile, short term investment, tight closing

• Lend for medium term maturities - 3-7 years, A-B & C assets
• Will lend on riskier assets in return for yield and personal guaranties
• Higher cost/fees than banks or life companies
• Can take interim positions while tenancies/occupancies mature
• Can do fixed or variable rate; variable is more common
• Closing can be in as little as 2 weeks for compensating yields

CMBS (Commercial Mortgage Backed Securities — aka, "Conduits")
CMBS lenders can finance deals that don't meet life company standards and may be too big for banks. Like life companies, CMBS fixed rate loans are designed to stay in place on stable properties. 5, 7 and 10 year maturities are common, with defeasance fees paid instead of yield maintenance. Forward rate locks are available but are hedged: they can turn against the borrower and become costly. CMBS underwriting will be more aggressive than most bank or life companies - with proceeds being greater. Conduits can underwrite up to 80% LTV on multi-family, but typically target 75% LTV in actual practice at 1.10-1.20 debt service coverage. They can structure an interest only payment for part or all of the loan term, depending on LTV coverage. There is no flexibility once the loan is funded because all CMBS loans are sold and the special servicer has no authority to adjust contract terms. Funding is typically 45-60 days after a completed application.